WTO Sees Trade Growing 3.7% After 5% Expansion in 2011

Global trade in goods will grow 3.7 percent this year after expanding a less-than-forecast 5 percent in 2011 as Europe’s debt crisis continues to crimp commerce, the World Trade Organization said.

“Europe is extremely integrated tradewise. Europe is a big global supply chain,” WTO Director-General Pascal Lamy said today in a Bloomberg Television interview from Geneva. “If Europe growth drops, then inevitably the volumes of trade not only within Europe, but with Europe and the rest of the world, will drop, and that’s the forecast we have for the moment.”

Developing economies will again lead trade growth this year, with a forecast 5.6 percent increase in merchandise exports, compared with 2 percent for developed nations. After two straight years of slower growth, trade will recover in 2013, with volume seen expanding 5.6 percent. The WTO used volumes rather than values for its assessment to avoid distortions caused by changes in commodity prices or exchange rates.

The dollar value of global merchandise trade climbed 19 percent last year to a record $18.2 trillion, beating the previous peak of $16.1 trillion in 2008, due in large part to higher commodity prices. The value of commercial-services exports advanced 11 percent to $4.2 trillion.

The prediction for 2012 assumes global output growth of 2.1 percent, down from 2.4 percent last year. Risks to that forecast include a steeper-than-expected downturn in Europe, financial contagion related to the European debt crisis, surging oil prices and geopolitical risks, the WTO said.

Downside Risks

The forecasts for both 2012 and 2013 are below the long- term average of 6 percent for the period from 1990 to 2008.

“Our benchmark is long-term growth of 6 percent in trade volumes per year,” Lamy said. “We were below that trend last year and, unfortunately, we forecast to be even lower this year. This year, as far as we can forecast, the main factor is a sluggish world economy and we see the risk on the downside rather than on the upside.”

Lamy warned that slow trade growth may lead governments to impose measures to protect their domestic industries.

“The WTO has so far deterred economic nationalism, but the sluggish pace of recovery raises concerns that a steady trickle of restrictive trade measures could gradually undermine the benefits of trade openness,” he said. “It is time to do no harm. WTO members should turn their attention to revitalizing the trading system and to ensuring such a scenario does not materialize.”

Tsunami, Floods

The WTO, which initially forecast commerce would grow 6.5 percent last year, scaled back its prediction as the world economy cooled amid the European debt crisis. Other “shocks” that held back trade last year included the Japanese earthquake and tsunami and floods in Thailand. The disruption of oil supplies in Libya cut African export growth by 8 percent and uprisings around the Arab world curbed African services exports.

Global trade grew a record 13.8 percent in 2010 after dropping 12 percent in 2009, the biggest contraction since World War II.

To contact the reporter on this story: Jennifer M. Freedman in Geneva at jfreedman@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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